Coinbase CEO suggests COIN’s 84% decline is at ‘fire sale prices’ after US$430 million loss
Coinhead
Coinhead
So Bitcoin is trading like a tumbling tech stock this week, but how about that Coinbase? It’s now down about 84% since debuting a bit over a year ago.
There are rocked tech shareholders just about everywhere you turn at the moment, but Coinbase was one of the worst hit stocks yesterday. COIN plummeted close to 30 per cent after the company posted a loss of US$430 million for the first quarter in its May earnings report, released on Tuesday.
The stock sunk as low as about US$50 yesterday (it’s currently trading at just under US$54). A week ago it was sitting above US$130, and even that was a long way off last year’s peak of US$381 – a brief zenith upon IPO listing.
Brian Armstrong, the crypto exchange giant’s CEO, sought to reassure investors that it’s a buy, though. He suggested that short-term market trauma can offer “fire sale prices”, quoting US venture capitalist Fred Wilson.
"Markets are irrational in the short term but not over the long term. They sometimes offer fire sale prices on the greatest companies in the world." – @fredwilson
— Brian Armstrong (@brian_armstrong) May 11, 2022
The firm’s been playing the US$430m downturn with a pretty straight bat in general. On an earnings call this week Coinbase CFO Alesia Haas addressed concerns about the company’s spending, including recent hiring of 1,200 employees.
The latest Coinbase shareholders’ letter (see snippet below) also emphasised a focus on a long-term strategy that prioritises building for the future and “investing prudently”, concluding with the meme-ish “wagmi” (we’re all gonna make it).
Wagmi, eh? Nice timing.
There’s something else, too, that most likely contributed to COIN’s cliff dive yesterday. And that’s headlines suggesting Coinbase could face the risk of bankruptcy, with its 98 million customers in danger of losing all their crypto.
In a series of tweets, Armstrong addressed these fears, which stemmed from a recent US Securities and Exchange Commission filing. “Your funds are safe at Coinbase, just as they’ve always been,” posted the Coinbase CEO.
In the SEC filing Coinbase had referred to customers as “unsecured creditors” in the event that the crypto exchange becomes insolvent.
Coinbase stock is down so bad that the price is touching the volume bars pic.twitter.com/pUWz5w3S5H
— Fintwit (@fintwit_news) May 11, 2022
Armstrong continued to reassure on Twitter, however, writing that the company is at “no risk of bankruptcy” despite the filing, which he explained was merely an SEC compliancy measure.
2/ We have no risk of bankruptcy, however we included a new risk factor based on an SEC requirement called SAB 121, which is a newly required disclosure for public companies that hold crypto assets for third parties. https://t.co/lwmgb1kFtA
— Brian Armstrong (@brian_armstrong) May 11, 2022
Armstrong also added a contrite note, writing: “We should have updated our retail terms sooner, and we didn’t communicate proactively when this risk disclosure was added. My deepest apologies, and a good learning moment for us as we make future changes.”